Defense witnesses take the stand in Martinovich trial

A top deputy of Jeffrey A. Martinovich said Wednesday he was unaware of any role the former financial service company CEO had in inflating the value of a solar company in which a Martinovich hedge fund owned a large stake.

Kevin Cadieux was at Langley Air Force Base when he first got to know Martinovich, who's on trial in federal court facing multiple fraud charges.

Cadieux took over operations at Martinovich's company, MICG Investment Management, in January 2008. He said he attended a series of meetings that included discussions about an MICG hedge fund called Venture Strategies that was managed by Martinovich and is a focus of the government's case.

Martinovich's attorney, James Broccoletti, asked Cadieux to explain what Martinovich's role was in placing a value on a privately owned company, EPV Solar, in which the Venture hedge fund owned a significant stake.

"He's not trying to determine what the value is," Cadieux said. "He's trying to inquire what the value is."

That account clashes with earlier testimony from Bruce Glasser, an MICG employee in New York City, who said Martinovich leaned on him to get inflated estimates of EPV's value.

"I'd felt it shouldn't be higher intellectually," Glasser said of one of the many valuations that bumped up the share price of EPV and as a result led to thousands of dollars in performance fees for MICG. In an email he sent that he discussed during his testimony, Glasser said he actually suggested to Martinovich that EPV's stock value should be lowered at one point.

In early January 2009, MICG's price for EPV – which was used to determine the value of Venture clients' accounts – was boosted to $2.88-a-share, more than double the price that the fund originally purchased shares in 2007.

A month later EPV filed for bankruptcy.

Cadieux said he was shocked to hear the news because Glasser had painted such a rosy picture about the New Jersey solar company's prospects in emails and presentations.

"I remember that day well," Cadieux said. "There was no information that might occur."

In addition to Cadieux, Broccoletti called to testify a tax preparer; an expert witness with a background in securities trading; and a childhood friend living in Ohio who turned to Martinovich for help raising money to start his information technology business. It was the first chance for the jury to hear from defense witnesses after nine days of witnesses called by the prosecution.

Among those who took the stand was Ken Monroe, a former MICG executive who was involved in recruiting brokers to expand the firm.

Monroe said even after the stock market collapse in late 2008, Martinovich remained positive about MICG's prospects.

At company retreats – called "go-forwards" by Martinovich – the firm's focus was always one of growth even as the financial industry as a whole took major hits, according to Monroe.

On the recruitment side, MICG set up a team to poach talent from other firms "that cold called brokers all day long," Monroe said.

And Martinovich put $1 million of personal money into MICG, according to Monroe, a gesture that showed "the company had war-chested and we were going to get through this to the other side."

But amid the recruiting efforts existing brokers were leaving the company in droves, and taking their books of business elsewhere, cutting into MICG's revenues.

Asked by a prosecutor how many brokers left MICG, Monroe said "I'd say it was enough to call it a mutiny."